Sensex - Journey to 50,000

 “ The stock market is a device for transferring money from the impatient to the patient.”- Warren Buffet

Sensex otherwise known as S&P BSE Sensex Index is the benchmark index of India’s BSE, formerly known as the Bombay Stock Exchange. The term Sensex was coined by analyst Deepak Mohoni is a combination of the words Sensitive and Index. In this article we will focus on what Sensitive implies in the context of markets.

Sensitive

o   Sensitive is the most important component of sensex, it reflects the nature of the beast. A beast that reacts to every piece of information – be it true, at times not true(remember Mukesh Ambani’s health) & at times at the whiff of an information(remember taper tantrum). This nature is what makes equities volatile & makes many investors uncomfortable.

o   Ironically the sensitiveness or volatility of the index is also theoretically defined as the measure of risk(standard deviation) & has created the perception that equities are risky.

o   However, the journey for the benchmark tells a different story. Starting in April 1979 to January 2021 it has moved from 100 to 50,000 in 42 years at a CAGR of 15.95%. This implies 1 crore invested in Sensex in 1979 would be 500 crores(without dividends).

o   History does not repeat but rhymes thus at Laurel we believe the biggest risk is not being in equities. It is time to read the first line of this article again & ask oneself on one’s investment behavior & plan ahead.    

Sensitive Events that the Sensex has seen & yet multiplied 500 X

o   12 Prime Ministers from 6 different political parties.

o   2 Prime ministers being assassinated, 2 wars & multiple terrorists attacks (parliament & Mumbai)

o   Banks have failed – Yes, Lakshmi Vilas, Global Trust, PMC. Most PSU Banks underwent Prompt Corrective Action.

o   India’s BOP crisis, Asian Financial Crisis, Lehmann/ Subprime crisis, Demonetization & Covid 19

o   Harshad Mehta, Ketan Parekh, Ramalingam Raju (Satyam), ILFS, Telecom, Coal & Commonwealth

Sensex outperforms all Major Global Indices

 

Sensex – A  graphical look at the journey

 

The last 5 – 10 years have been the most difficult period in Indian economic history with our banking system collapsing thanks to the past excesses. At Laurel, we believe a golden era for equities has restarted & 50,000 is a new beginning.